What is the Compound (COMP) crypto token? – Compound, Lending, DeFi

June 19, 2025Valerii Wilson

Title: The Naked Truth About COMP: DeFi, Lending & Crypto’s Skinny Dip

Hi there, my name is Valerii Wilson. I’m a seasoned crypto security expert and smart contract auditor, and today, I’m here to share some hard-earned lessons about Compound (COMP) – but first, let me ask you a question: have you ever dived headfirst into a pool without checking the depth? No? Smart move. Because jumping in blindly is not unlike jumping into DeFi without understanding its nuances.

Compound is a Decentralized Finance (DeFi) protocol that allows users to lend and borrow cryptocurrencies. Imagine it like an online bank, but instead of dollars or euros, you’re dealing with digital assets such as Ether or Bitcoin. The COMP token is the native governance token of Compound, giving holders a say in how the platform evolves.

Sounds simple enough, right? Well, if simplicity was all it took to secure your crypto, we wouldn’t be in this mess.

Remember the time you left your car keys on the kitchen table and went out for a run, only to realize the potential risks afterward? It’s the same with smart contracts – one misplaced detail can lead to significant vulnerabilities.

Back in 2020, an exploit was found in Compound’s smart contract that allowed users to borrow more funds than intended. This wasn’t just a minor oversight; it was akin to leaving your front door wide open while you go off for a vacation. Thankfully, the community quickly responded and managed to recover most of the stolen funds.

But this isn’t an isolated incident. Smart contract audits are crucial, and yet many developers skimp on them or choose audit firms with questionable qualifications. It’s like hiring an amateur plumber to fix your pipes – it might work out fine, but more likely than not, you’ll end up with a flooded kitchen.

Now let’s talk about NFTs – the digital equivalent of designer handbags or limited-edition sneakers. They can be attached to any digital asset, including Compound tokens. While they’ve brought a whole new dimension to the world of crypto, they also present risks.

We’ve seen multiple NFT scams that take advantage of users’ excitement and lack of awareness. Remember, just because something has an NFT attached doesn’t mean it’s legit. It’s like seeing a designer label on a knockoff purse – looks real but turns out to be a cheap imitation.

Finally, let’s touch upon Compound lending. This is where things can get messy if not handled properly. Just as a leaky pipe can ruin your basement, a mismanaged loan on Compound can result in significant losses.

For instance, imagine you lend your digital assets to someone who then defaults on the loan. Now, not only have you lost your asset, but you also need to go through a cumbersome dispute resolution process – all while hoping that the borrower doesn’t disappear with your crypto.

Compound and DeFi offer exciting opportunities, but they also come with risks. It’s not a pool party without some potential hazards lurking beneath the surface. So before you dive in headfirst, remember this: